Seemingly acting on the behest of the finance ministry, ministry of railways has scrapped the bidding process for the ambitious Rs 6,000 crore New Delhi railway station modernisation project and has reinvited applications from the interested parties. The indicative cost of the project as per the new request for qualification (RFQ) is Rs 12,000 crore.

The issue was caught in controversy over the cross ownership issue. As per one of the clauses in the request for qualification (RFQ) for the project, bidders with common controlling shareholders or other ownership interest cannot compete as it could lead to ‘conflict of interest’.

Also, the levels of direct or indirect shareholding by an individual or firm in one bidder company should not be over five per cent of its paid-up capital and subscribed capital, and not more than one per cent in another bidder.

A number of private bidders were disqualified because of the clause. The finance ministry reportedly suggested that if the clause stalled the project, it was advisable to drop it and float the tender again.

Incidentally, the Planning Commission had suggested that the railway ministry should revise upwards the estimated capital cost of the project considering the prevailing interest rates.

It pointed out that the financing cost (including price escalation) of the station’s redevelopment was estimated at 25 per cent of the overall capital cost. But at the time the first request for qualification (RFQ) was issued in October 2007, interest rates varied between 8 per cent and 9 per cent.

However, with the tightening of the monetary policy in recent months, interest rates are close to 13 per cent, and the financing cost of the project would increase proportionately.

Accordingly, the Plan panel suggested that the required investment for the station modernisation should be increased to Rs 9,025 crore.

The facelift of the New Delhi railway station based on international standards envisages development of 86 hectares of railway land around the station. The cost of the project includes mandatory capital expenditure, real estate development for commercial purposes, and interest during construction.

The scope of work includes remodeling the railway yard, upgrade and redevelopment of the existing railway station and associated buildings and railway land followed by maintenance and operation thereof.